Investors and management use the statement of cash flows to evaluate a firm’s profitability. A. True B. False Solution Profitability is evaluated using a company\'s profit and loss statement or income statement. Various metrics like EBITDA (earnings before interest, taxes, depreciation and ammortization), EBIT (earnings before interest and taxes), PBT (profit before tax) and Net income are used to gauge profitability. All these metrics are available in the profit and loss statement or income statement. Cash flow statement is used to analyse how a company earned its cash from operating, financing and investing activites. It is used in evaluating valuation (from cash flow from operations) but not profitability. Answer is B - FALSE. .

1. Investors and management use the statement of cash flows to evaluate a firm’s profitability.
A. True
B. False
Solution
Profitability is evaluated using a company's profit and loss statement or income statement.
Various metrics like EBITDA (earnings before interest, taxes, depreciation and ammortization),
EBIT (earnings before interest and taxes), PBT (profit before tax) and Net income are used to
gauge profitability. All these metrics are available in the profit and loss statement or income
statement.
Cash flow statement is used to analyse how a company earned its cash from operating, financing
and investing activites. It is used in evaluating valuation (from cash flow from operations) but
not profitability.
Answer is B - FALSE.